Census 2001


Research Paper Index

Research Paper no. 3 2002-03

Australia's Foreign Debt

Tony Kryger
Statistics Group
3 March 2003

Contents


Major Issues
Introduction
Level of Foreign Debt
As a Percentage of Gross Domestic Product
Interest Liability
As a Percentage of Gross Domestic Product
Historical Perspective
Interest as a Percentage of Gross Domestic Product
Composition of Gross Foreign Debt by Institutional Sector
Composition of Gross Foreign Debt by Currency
Composition of Gross Foreign Debt by Country
Composition of Gross Foreign Debt by Maturity
Components of Increase in Net Foreign Debt
Composition of Net Foreign Investment-Debt and Equities
Endnotes

List of Tables
Table 1. Gross and Net Foreign Debt, 1976-2002
Table 2. Interest on Foreign Debt, 1959-60 to 2001-02
Table 3. Historical Data, 1900-01 to 2001-02
Table 4. Composition of Gross Foreign Debt-Institutional Sector, 1980-2002
Table 5. Composition of Gross Foreign Debt-Currency, 1981-2002
Table 6. Composition of Gross Foreign Debt-Country, 1992-2001
Table 7. Composition of Gross Foreign Debt-Residual Maturity of Debt Outstanding, 1997-2002
Table 8. Components of Increase in Net Foreign Debt, 1988-89 to 2001-02
Table 9. Net Foreign Investment In Australia-Levels, 1980-2002

Major Issues

  • Australia has always been a net recipient of overseas funds.
  • After being fairly low and stable for a number of years, Australia's foreign debt grew rapidly after 1981. Between 1981 and 2002, the level of foreign debt increased from $19 billion to $527 billion in gross terms and from $9 billion to $330 billion in net terms, i.e. after deducting Australia's reserve assets and lending abroad. (Table 1.)
  • The foreign debt to gross domestic product (GDP) ratio gives an indication of what has been happening to debt relative to the size of the economy. Between 1981 and 2002, Australia's gross foreign debt increased from 13 to 74 per cent of GDP, while net foreign debt increased from 6 to 46 per cent. (Table 1.)
  • The ratio of Australia's interest payments on gross foreign debt to GDP averaged around half of one per cent through the 1960s and most of the 1970s. It then increased rapidly to peak at 4.0 per cent in 1990-91, falling to 2.6 per cent in 2001-02. Therefore, 2.6 per cent of the value of all goods and services produced within Australia in 2001-02 was required to meet the interest commitment on our gross foreign debt in that year. (Table 2.)
  • In 2002, Australia's gross foreign debt as a proportion of GDP was at its second highest level in more than 60 years. A higher level of debt was recorded in 2001 but before this, the only times when debt as a proportion of GDP was higher, were the periods 1901 to 1906 and 1931 to 1937. (Tables 1 and 3.)
  • For all of the period from the mid-1940s through to the early 1980s, the ratio of Australia's interest payments on gross foreign debt to the value of its exports of goods and services (or debt service ratio) was below 6 per cent. It increased steadily thereafter and by 1991 had climbed to 24 per cent, falling to 12 per cent in 2002. (Table 3.)
  • Over the past couple of decades, the general government and Reserve Bank's share of gross foreign debt has fallen sharply, as has the share held by private non-financial corporations. Whereas the latter were for many years the largest holders of debt, that position has long since been overtaken by private financial corporations which in 2001 held 69 per cent of gross foreign debt. (Table 4.)
  • The proportion of debt denominated in Australian dollars increased substantially from 12 per cent in 1981 to 45 per cent in 1997, falling to 33 per cent in 2002. The greater the proportion of debt denominated in Australian dollars, the lower the risk that a fall in the $A will increase the level of debt. (Table 5.)
  • The most important creditor countries for Australia have consistently been the United States, United Kingdom and Japan. The relative importance of these countries has changed over time so that whereas Japan was the most important creditor country in the early 1990s, that position has now gone to the United States. In 2001, the United States accounted for 26 per cent of Australia's gross foreign debt. (Table 6.)
  • The turnover of foreign debt is rapid with most loans outstanding due within a very short period. In 2002, 55 per cent of loans were due within a year and 40 per cent were due within 90 days. (Table 7.)
  • Exchange rate movements have at times had a significant impact on the level of debt. For example, well over half the increase in net foreign debt that occurred between June 2000 and June 2001 was due to the decline in the value of the Australian dollar that occurred over this time. (Table 8.)

For many years, foreign investment in Australia has been predominantly in the form of borrowed funds from overseas. This was not always the case and whereas debt accounted for 86 per cent of net foreign investment in 2002, the corresponding figure in 1980 was only 29 per cent. (Table 9.)

 

Introduction

This paper on foreign debt is the third update of a paper originally prepared in September 1989(1).

The objectives of this paper are to provide explanation and detailed information on:

  • the levels of gross and net foreign debt;
  • comparisons over time;
  • the interest liability on foreign debt;
  • composition of foreign debt, by institutional sector, currency, country and repayment period; and
  • the relationship between foreign borrowings and other capital inflows.

Level of Foreign Debt

Dollar Amount

Concepts

Foreign debt is defined as the amount borrowed from non-residents by residents of Australia. It is also called external debt or the level of foreign borrowing. Foreign debt is distinguished from other kinds of foreign investment capital inflow such as foreign ownership, because it carries with it the obligation to pay interest and repay the principal. It should be noted that foreign debt does not equal 'national debt'. The latter is the total government debt-which comprises government borrowing from overseas residents and government borrowing from Australian residents-and thus excludes overseas borrowings by the private sector.

Gross foreign debt is the total amount of borrowings from non-residents. It includes securities issued such as bonds as well as loans, advances, deposits, debentures and overdrafts.

Net foreign debt is the gross foreign debt, minus the value of foreign reserves held by the Reserve Bank of Australia and minus lending by residents of Australia to non-residents. Reserve assets held by the Reserve Bank comprise gold, foreign exchange, special drawing rights and Australia's reserve position in the International Monetary Fund.

Comments

The gross foreign debt at June 2002 was $527 billion. After deducting Australia's reserve assets and lending abroad of $196 billion, there was a net foreign debt of $330 billion. After being fairly low and stable through the late 1970s and early 1980s, foreign debt increased steadily after 1981, largely as a result of the accumulation of high current account deficits and the expansion of Australian equity investment abroad. Part of this overseas investment was funded by increased borrowings.

Between June 1981 and June 2002, gross foreign debt rose at an annual average rate of 17.2 per cent. The corresponding figure for net foreign debt was higher at 18.5 per cent, reflecting the fact that Australian lending abroad has not risen as fast as Australian borrowings.

Details: Table 1 and Figure 1.

As a Percentage of Gross Domestic Product

Concepts

Foreign debt is often expressed as a percentage of annual gross domestic product (GDP) in order to show its significance relative to the size of the overall economy. It allows more appropriate comparisons over time, as GDP grows with inflation and population, and reflects to a degree the economy's capacity to repay. GDP is a measure of the total output of the economy. Although this ratio is a conventional measure, it does not mean that this proportion of GDP must be applied to foreign debt. GDP is a flow of goods and services during a period, while foreign debt is a level at one point in time which will involve interest and repayments of principal over many periods into the future.

Two other measures of the relative size of foreign debt are presented in Table 1. One is the ratio of foreign debt to the capital stock (i.e. the total value of dwellings, other buildings, engineering construction and equipment). The second is the ratio of foreign debt to the value of exports of goods and services.

Data on average debt per person (or family) are sometimes used as a dramatic way of presenting foreign debt statistics. This may make large numbers easier to comprehend, but can be misleading to the extent that it suggests that liability for the debt is evenly divided through the whole population. In fact, liability lies largely with businesses (including foreign-owned), which financed the purchase of assets, which in turn generate income to service and repay the debt.

Comments

Throughout the late 1970s and early 1980s, gross foreign debt was fairly low at less than 15 per cent of GDP. It increased rapidly after 1981 and in the six years to June 1987 it more than tripled from 13 to 45 per cent of GDP. It continued to increase steadily over the next few years to 61 per cent at June 1999, rising sharply to 74 per cent at June 2001.

A similar pattern is evident for net foreign debt as a proportion of GDP which has increased more than seven-fold since June 1981.

Gross foreign debt has risen from around 80 per cent of annual exports of goods and services in June 1981, to well over triple those exports for the entire period from June 1998. Gross foreign debt is currently 3.4 times the value of exports.

Net foreign debt per capita has increased from $600 in June 1981 to $16,800 in June 2002.

Details: Table 1 and Figure 2.

Table 1. Gross and Net Foreign Debt, 1976-2002

30 June

$ million

 

per cent of GDP

 

per cent

 

$ per capita

Gross

foreign

debt

Net

foreign

debt

Gross

foreign

debt

Net

foreign

debt

Net foreign

debt / Net

capital stock

Gross foreign

debt / Exports

goods & services

Gross

foreign

debt

Net

foreign

debt

1976

7647

3133

9.6

3.9

1.4

68.1

545

223

1977

9929

5160

10.8

5.6

2.1

74.0

700

364

1978

12664

7434

12.6

7.4

2.7

88.9

882

518

1979

15615

9553

13.8

8.5

3.0

92.3

1076

658

1980

16666

7923

13.0

6.2

2.2

75.7

1134

539

1981

18847

9361

12.9

6.4

2.2

83.4

1263

627

1982

29394

18378

17.6

11.0

3.7

124.0

1936

1210

1983

41224

25169

22.8

13.9

4.6

160.8

2678

1635

1984

50676

31850

24.9

15.7

5.3

175.4

3253

2044

1985

75452

53055

33.5

23.6

8.0

211.1

4779

3360

1986

101925

78396

41.1

31.6

10.4

261.7

6363

4894

1987

122439

87971

45.0

32.3

10.6

276.3

7528

5409

1988

138130

96502

44.5

31.1

10.5

267.0

8355

5837

1989

161874

113989

46.0

32.4

11.1

292.4

9627

6779

1990

184239

130809

47.8

34.0

11.7

302.5

10796

7665

1991

197662

143153

49.7

36.0

12.3

298.3

11436

8282

1992

217955

162466

53.6

39.9

13.7

311.0

12458

9287

1993

238542

177453

56.0

41.6

14.5

310.2

13502

10044

1994

246484

171313

55.1

38.3

13.5

296.9

13805

9595

1995

268247

190790

56.9

40.5

14.4

306.0

14843

10557

1996

275533

193872

54.8

38.6

14.1

278.0

15048

10588

1997

302846

208628

57.2

39.4

14.7

288.0

16337

11254

1998

346971

227782

61.8

40.6

15.2

305.0

18496

12142

1999

359839

230689

60.8

39.0

14.5

321.2

18955

12152

2000

421771

277804

67.0

44.2

16.4

334.6

21938

14450

2001

498775

313472

74.2

46.6

17.3

324.9

25598

16088

2002

526501

330457

73.5

46.2

17.6

345.5

26716

16768

Interest Liability

Dollar Amount

Concepts

Interest payments on debt are an important aspect of the impact of foreign debt. While the level of debt reflects the amount of principal that needs to be repaid over a number of years, interest liabilities are incurred throughout the period of the loan.

Comments

After being fairly low for a number of years, Australia's interest liability on foreign debt increased from $1 billion in 1979-80 to $16 billion in 1990-91. It then fell, as the result of declining interest rates, to $11 billion in 1993-94, increasing to $17 billion in 1999-00 and $19 billion in 2000-01. In 2001-02, Australia's interest liability on foreign debt was $18 billion.

Details: Table 2 and Figure 3.

As a Percentage of Gross Domestic Product

Concepts

As with the level of debt, it is useful to obtain a measure of the relative size of interest on foreign debt. The method most commonly used is interest as a percentage of exports of goods and services (or debt service ratio). This measure emphasises the international liquidity aspects of interest payments. Another method is interest as a percentage of GDP, which emphasises the burden on incomes.

The debt service ratio makes possible more meaningful comparisons over time, because both interest and exports are affected by inflation. As well, exports of goods and services provide a source of foreign exchange income that can be applied to meeting interest payments. (Other sources of foreign exchange are property and labour income, transfer payments and further borrowing.)

An estimate of the interest rate on gross foreign debt can be obtained by dividing the interest paid in a given year by the weighted sum of two-thirds the debt stock at the start of the year and one-third the debt stock at the end of the year. This accords with a method published by former Economic Planning Advisory Council(2).

Comments

Interest paid on gross foreign debt was around half of one per cent of GDP through the 1960s and most of the 1970s. The interest liability climbed to around 3 per cent in the latter half of the 1980s and peaked at 4.0 per cent in 1990-91. It has since fallen and for all of the period since 1992-93 it has remained below 3 per cent. In 2001-02, Australia's interest liability was 2.6 per cent of GDP, meaning that 2.6 per cent of the value of all goods and services produced within Australia was required to meet the interest commitment on our gross foreign debt.

Interest received from overseas is relatively small. In 2001-02 it amounted to 0.6 per cent of GDP.

As a percentage of exports of goods and services, gross interest has risen from between 3 and 5 per cent in the 1960s and 1970s to peak at 24.0 per cent in 1990-91. By 2001-02, gross interest had fallen to 12.0 per cent and net interest to 9.2 per cent of the value of goods and services exported.

The average interest rate for 2001-02 was 3.6 per cent per annum, considerably below rates of between 8 and 9 per cent that were common during the 1980s.

Details: Table 2 and Figure 4.

Table 2. Interest on Foreign Debt, 1959-60 to 2001-02

$ Million and Debt Service Ratios

$ million

% of exports of goods and services

% of GDP

% p.a.

Interest on

gross

foreign debt

Interest on

net

foreign debt

Interest on

gross

foreign debt

Interest on

net

foreign debt

Interest on

gross

foreign debt

Interest on

net

foreign debt

Average

interest

rate

1959-60

61

34

2.8

1.6

0.4

0.2

n.a.

1960-61

68

35

3.1

1.6

0.4

0.2

n.a.

1961-62

72

24

2.9

1.0

0.4

0.1

n.a.

1962-63

75

39

3.0

1.6

0.4

0.2

n.a.

1963-64

83

36

2.6

1.1

0.4

0.2

n.a.

1964-65

88

27

2.9

0.9

0.4

0.1

n.a.

1965-66

102

49

3.3

1.6

0.4

0.2

n.a.

1966-67

112

49

3.2

1.4

0.4

0.2

n.a.

1967-68

124

71

3.5

2.0

0.4

0.3

n.a.

1968-69

154

79

4.0

2.0

0.5

0.3

n.a.

1969-70

191

118

4.0

2.5

0.5

0.3

5.5

1970-71

237

143

4.7

2.8

0.6

0.4

6.0

1971-72

293

150

5.2

2.6

0.7

0.4

6.0

1972-73

297

78

4.2

1.1

0.6

0.2

5.4

1973-74

306

8

3.9

0.1

0.5

0.0

5.9

1974-75

404

123

4.0

1.2

0.6

0.2

7.6

1975-76

435

240

3.9

2.1

0.5

0.3

6.7

1976-77

477

314

3.6

2.3

0.5

0.3

5.7

1977-78

576

449

4.0

3.2

0.6

0.4

5.3

1978-79

838

677

5.0

4.0

0.7

0.6

6.1

1979-80

1108

908

5.0

4.1

0.9

0.7

6.9

1980-81

1216

938

5.4

4.1

0.8

0.6

7.0

1981-82

1839

1582

7.8

6.7

1.1

0.9

8.2

Table 2. Interest on Foreign Debt, 1959-60 to 2001-02 continued

$ Million and Debt Service Ratios

$ million

% of exports of goods and services

% of GDP

% p.a.

Interest on

gross

foreign debt

Interest on

net

foreign debt

Interest on

gross

foreign debt

Interest on

net

foreign debt

Interest on

gross

foreign debt

Interest on

net

foreign debt

Average

interest

rate

1982-83

2839

2302

11.1

9.0

1.6

1.3

8.5

1983-84

3705

2884

12.8

10.0

1.8

1.4

8.3

1984-85

5297

4382

14.8

12.3

2.4

1.9

9.0

1985-86

6703

5932

17.2

15.2

2.7

2.4

8.0

1986-87

7891

7214

17.8

16.3

2.9

2.6

7.3

1987-88

8845

7793

17.1

15.1

2.8

2.5

6.9

1988-89

11197

9416

20.2

17.0

3.2

2.7

7.7

1989-90

14420

11935

23.7

19.6

3.7

3.1

8.5

1990-91

15922

12884

24.0

19.4

4.0

3.2

8.4

1991-92

13690

10717

19.5

15.3

3.4

2.6

6.7

1992-93

12123

9367

15.8

12.2

2.8

2.2

5.4

1993-94

11240

8961

13.5

10.8

2.5

2.0

4.7

1994-95

13215

10750

15.1

12.3

2.8

2.3

5.2

1995-96

13606

11362

13.7

11.5

2.7

2.3

5.0

1996-97

14276

11785

13.6

11.2

2.7

2.2

5.0

1997-98

14211

11040

12.5

9.7

2.5

2.0

4.5

1998-99

13643

10572

12.2

9.4

2.3

1.8

3.9

1999-00

17210

13300

13.7

10.6

2.7

2.1

4.5

2000-01

19395

14770

12.6

9.6

2.9

2.2

4.3

2001-02

18265

14007

12.0

9.2

2.6

2.0

3.6

Note: Where interest on foreign debt was not available, total interest paid overseas was used.

Historical Perspective

Debt as a Percentage of Gross Domestic Product

Concepts

Long-term data can be used to give an historical perspective on Australia's current foreign debt situation. Comprehensive estimates of foreign debt are only available from 1976 onwards. However, data for public securities held overseas are available for the whole of last century. Although public securities now represent only a minor part of foreign debt, this was not the case in the past. While estimates of private foreign debt are not available for earlier years, data on interest paid suggest that the level of this debt was insignificant prior to the mid-1960s. There exists therefore a reasonable, although not comprehensive, measure of foreign debt since 1901.

Comments

As a proportion of GDP, Australia's foreign debt has risen rapidly from less than 10 per cent in the mid 1970s to 74 per cent today. Since the level of debt on public securities represents almost all of total debt during the first half of last century, it is possible to say that Australia's gross foreign debt as a proportion of GDP in 2001-02 was at its second highest level, while in 2000-01 it was at its highest level, in more than 60 years. Higher levels of debt were recorded in the periods 1900-01 to 1905-06 and 1930-31 to 1936-37.

Details: Table 3 and Figure 5.

Interest as a Percentage of Gross Domestic Product

Concepts

Interest payments on public securities held overseas are also available for the whole of the twentieth century. Total interest payments on foreign debt are available since official balance of payments statistics were first compiled (for 1936-37 to 1939-40 and from 1945-46 onwards). The difference between total interest payments on foreign debt and interest payments on only public securities held overseas is so small, however, as to be virtually negligible before the mid-1960s.

Comments

For the first three decades of last century, Australia's interest liability on foreign debt (approximated by its interest liability on public securities held overseas) fluctuated mostly between 2 and 3 per cent of GDP. It then climbed to 4.4 per cent in 1930-31, before falling to less than one per cent for all of the 1950s, 1960s, 1970s and the early part of the 1980s. It climbed to 4.0 per cent in 1990-91, before falling again and in 2001-02 was equal to 2.6 per cent of GDP.

For all of the period from the mid-1940s through to the early 1980s, the ratio of Australia's interest on foreign debt to the value of its exports of goods and services (or debt service ratio) was below 6 per cent. It climbed steadily thereafter and by 1990-91 it had reached 24.0 per cent, falling by half to 12.0 per cent in 2001-02.

Details: Table 3 and Figure 6.

Table 3. Historical Data, 1900-01 to 2001-02

 

Level of gross foreign debt

 

Interest on gross foreign debt

 

Public securities / Official

 

Total

 

Public securities / Official

 

Total

 

$ million

% of GDP

 

$ million

% of GDP

 

$ million

% of exports

of goods

& services

% of GDP

 

$ million

% of exports

of goods

& services

% of GDP

1900-01

357

85.2

n.a.

n.a.

13

12.6

3.1

n.a.

n.a.

n.a.

1901-02

364

82.0

n.a.

n.a.

13

13.4

2.9

n.a.

n.a.

n.a.

1902-03

375

87.6

n.a.

n.a.

14

14.9

3.3

n.a.

n.a.

n.a.

1903-04

377

84.2

n.a.

n.a.

14

13.2

3.1

n.a.

n.a.

n.a.

1904-05

378

85.1

n.a.

n.a.

14

11.6

3.2

n.a.

n.a.

n.a.

1905-06

384

80.2

n.a.

n.a.

14

10.5

2.9

n.a.

n.a.

n.a.

1906-07

372

69.1

n.a.

n.a.

13

8.8

2.4

n.a.

n.a.

n.a.

1907-08

367

68.5

n.a.

n.a.

13

9.0

2.4

n.a.

n.a.

n.a.

1908-09

381

66.5

n.a.

n.a.

14

10.1

2.4

n.a.

n.a.

n.a.

1909-10

383

61.5

n.a.

n.a.

14

8.9

2.2

n.a.

n.a.

n.a.

1910-11

382

55.8

n.a.

n.a.

14

8.4

2.0

n.a.

n.a.

n.a.

1911-12

388

52.9

n.a.

n.a.

14

8.5

1.9

n.a.

n.a.

n.a.

1912-13

409

51.0

n.a.

n.a.

15

8.8

1.9

n.a.

n.a.

n.a.

1913-14

455

52.7

n.a.

n.a.

16

9.4

1.9

n.a.

n.a.

n.a.

1914-15

493

58.8

n.a.

n.a.

19

13.4

2.3

n.a.

n.a.

n.a.

1915-16

542

55.9

n.a.

n.a.

21

12.7

2.2

n.a.

n.a.

n.a.

1916-17

587

57.4

n.a.

n.a.

23

9.5

2.3

n.a.

n.a.

n.a.

1917-18

701

66.0

n.a.

n.a.

29

13.9

2.7

n.a.

n.a.

n.a.

1918-19

694

60.6

n.a.

n.a.

29

12.8

2.5

n.a.

n.a.

n.a.

1919-20

716

57.1

n.a.

n.a.

31

10.3

2.5

n.a.

n.a.

n.a.

1920-21

743

53.8

n.a.

n.a.

33

12.3

2.4

n.a.

n.a.

n.a.

1921-22

823

59.7

n.a.

n.a.

38

14.2

2.8

n.a.

n.a.

n.a.

1922-23

839

55.6

n.a.

n.a.

38

14.5

2.5

n.a.

n.a.

n.a.

1923-24

922

58.8

n.a.

n.a.

43

16.2

2.7

n.a.

n.a.

n.a.

1924-25

928

53.9

n.a.

n.a.

44

12.9

2.6

n.a.

n.a.

n.a.

1925-26

1004

60.5

n.a.

n.a.

48

15.9

2.9

n.a.

n.a.

n.a.

Table 3. Historical Data, 1900-01 to 2001-02 continued

 

Level of gross foreign debt

 

Interest on gross foreign debt

 

Public securities / Official

 

Total

 

Public securities / Official

 

Total

 

$ million

% of GDP

 

$ million

% of GDP

 

$ million

% of exports

of goods

& services

% of GDP

 

$ million

% of exports

of goods

& services

% of GDP

1926-27

1032

59.7

n.a.

n.a.

49

17.1

2.8

n.a.

n.a.

n.a.

1927-28

1142

65.7

n.a.

n.a.

55

18.8

3.2

n.a.

n.a.

n.a.

1928-29

1144

66.8

n.a.

n.a.

55

17.9

3.2

n.a.

n.a.

n.a.

1929-30

1150

73.4

n.a.

n.a.

55

25.5

3.5

n.a.

n.a.

n.a.

1930-31

1198

93.1

n.a.

n.a.

57

28.4

4.4

n.a.

n.a.

n.a.

1931-32

1310

108.3

n.a.

n.a.

49

22.4

4.0

n.a.

n.a.

n.a.

1932-33

1299

102.8

n.a.

n.a.

47

20.9

3.7

n.a.

n.a.

n.a.

1933-34

1289

95.1

n.a.

n.a.

44

17.0

3.2

n.a.

n.a.

n.a.

1934-35

1286

89.8

n.a.

n.a.

43

17.6

3.0

n.a.

n.a.

n.a.

1935-36

1281

81.4

n.a.

n.a.

42

14.6

2.7

n.a.

n.a.

n.a.

1936-37

1278

74.4

n.a.

n.a.

41

11.5

2.4

42

11.8

2.4

1937-38

1278

68.8

n.a.

n.a.

41

11.7

2.2

42

12.0

2.3

1938-39

1288

70.8

n.a.

n.a.

41

13.1

2.3

42

13.4

2.3

1939-40

1306

66.0

n.a.

n.a.

41

10.9

2.1

42

11.2

2.1

1940-41

1324

61.7

n.a.

n.a.

42

11.1

2.0

n.a.

n.a.

n.a.

1941-42

1317

52.7

n.a.

n.a.

40

9.6

1.6

n.a.

n.a.

n.a.

1942-43

1321

46.2

n.a.

n.a.

40

9.3

1.4

n.a.

n.a.

n.a.

1943-44

1269

43.7

n.a.

n.a.

39

6.6

1.3

n.a.

n.a.

n.a.

1944-45

1230

43.3

n.a.

n.a.

38

7.2

1.3

n.a.

n.a.

n.a.

1945-46

1148

39.1

n.a.

n.a.

32

5.7

1.1

33

5.9

1.1

1946-47

1111

35.6

n.a.

n.a.

31

4.7

1.0

32

4.9

1.0

1947-48

1122

29.9

n.a.

n.a.

29

3.2

0.8

30

3.3

0.8

1948-49

1093

24.4

n.a.

n.a.

28

2.5

0.6

30

2.6

0.7

1949-50

1099

20.9

n.a.

n.a.

27

2.1

0.5

29

2.2

0.6

1950-51

1067

15.2

n.a.

n.a.

26

1.2

0.4

27

1.3

0.4

1951-52

1113

14.8

n.a.

n.a.

27

1.8

0.4

28

1.9

0.4

Table 3. Historical Data, 1900-01 to 2001-02 continued

 

Level of gross foreign debt

 

Interest on gross foreign debt

 

Public securities / Official

 

Total

 

Public securities / Official

 

Total

 

$ million

% of GDP

 

$ million

% of GDP

 

$ million

% of exports

of goods

& services

% of GDP

 

$ million

% of exports

of goods

& services

% of GDP

1952-53

1142

13.4

n.a.

n.a.

28

1.5

0.3

30

1.6

0.4

1953-54

1165

12.5

n.a.

n.a.

28

1.6

0.3

29

1.6

0.3

1954-55

1216

12.2

n.a.

n.a.

30

1.8

0.3

31

1.8

0.3

1955-56

1269

11.8

n.a.

n.a.

45

2.6

0.4

46

2.7

0.4

1956-57

1216

10.4

n.a.

n.a.

44

2.0

0.4

46

2.1

0.4

1957-58

1248

10.4

n.a.

n.a.

47

2.6

0.4

49

2.7

0.4

1958-59

1319

10.2

n.a.

n.a.

52

2.8

0.4

54

2.9

0.4

1959-60

1389

8.8

n.a.

n.a.

56

2.6

0.4

61

2.8

0.4

1960-61

1413

8.5

n.a.

n.a.

60

2.8

0.4

68

3.1

0.4

1961-62

1424

8.4

n.a.

n.a.

61

2.5

0.4

72

2.9

0.4

1962-63

1522

8.4

n.a.

n.a.

67

2.7

0.4

75

3.0

0.4

1963-64

1545

7.7

n.a.

n.a.

69

2.2

0.3

83

2.6

0.4

1964-65

1539

7.0

n.a.

n.a.

69

2.3

0.3

88

2.9

0.4

1965-66

1505

6.5

n.a.

n.a.

69

2.2

0.3

102

3.3

0.4

1966-67

1562

6.1

n.a.

n.a.

73

2.1

0.3

112

3.2

0.4

1967-68

1557

5.6

n.a.

n.a.

77

2.2

0.3

124

3.5

0.4

1968-69

1747

5.6

n.a.

n.a.

84

2.2

0.3

154

4.0

0.5

1969-70

1636

4.7

n.a.

n.a.

91

1.9

0.3

191

4.0

0.5

1970-71

1600

4.2

n.a.

n.a.

89

1.7

0.2

237

4.7

0.6

1971-72

1497

3.5

n.a.

n.a.

91

1.6

0.2

293

5.2

0.7

1972-73

1350

2.8

n.a.

n.a.

84

1.2

0.2

297

4.2

0.6

1973-74

1163

2.0

n.a.

n.a.

80

1.0

0.1

306

3.9

0.5

1974-75

1334

2.0

n.a.

n.a.

86

0.9

0.1

404

4.0

0.6

1975-76

1501

1.9

7647

9.6

94

0.8

0.1

435

3.9

0.5

1976-77

2417

2.6

9929

10.8

130

1.0

0.1

477

3.6

0.5

1977-78

4351

4.3

12664

12.6

187

1.3

0.2

576

4.0

0.6

Table 3. Historical Data, 1900-01 to 2001-02 continued

 

Level of gross foreign debt

 

Interest on gross foreign debt

 

Public securities / Official

 

Total

 

Public securities / Official

 

Total

 

$ million

% of GDP

 

$ million

% of GDP

 

$ million

% of exports

of goods

& services

% of GDP

 

$ million

% of exports

of goods

& services

% of GDP

1978-79

5928

5.3

15615

13.8

356

2.1

0.3

838

5.0

0.7

1979-80

5894

4.6

16666

13.0

438

2.0

0.3

1108

5.0

0.9

1980-81

5105

3.5

18847

12.9

416

1.8

0.3

1216

5.4

0.8

1981-82

6046

3.6

29394

17.6

435

1.8

0.3

1839

7.8

1.1

1982-83

8151

4.5

41224

22.8

596

2.3

0.3

2839

11.1

1.6

1983-84

9242

4.5

50676

24.9

711

2.5

0.3

3705

12.8

1.8

1984-85

15211

6.8

75452

33.5

964

2.7

0.4

5297

14.8

2.4

1985-86

23934

9.6

101925

41.1

1474

3.8

0.6

6703

17.2

2.7

1986-87

30763

11.3

122439

45.0

2288

5.2

0.8

7891

17.8

2.9

1987-88

32350

10.4

138130

44.5

2962

5.7

1.0

8845

17.1

2.8

1988-89

32013

9.1

161874

46.0

3209

5.8

0.9

11197

20.2

3.2

1989-90

37475

9.7

184239

47.8

3982

6.5

1.0

14420

23.7

3.7

1990-91

39856

10.0

197662

49.7

4437

6.7

1.1

15922

24.0

4.0

1991-92

47638

11.7

217955

53.6

3777

5.4

0.9

13690

19.5

3.4

1992-93

58825

13.8

238542

56.0

3335

4.3

0.8

12123

15.8

2.8

1993-94

62179

13.9

246484

55.1

3658

4.4

0.8

11240

13.5

2.5

1994-95

78372

16.6

268247

56.9

4952

5.6

1.1

13215

15.1

2.8

1995-96

81136

16.1

275533

54.8

5066

5.1

1.0

13606

13.7

2.7

1996-97

82824

15.6

302846

57.2

4900

4.7

0.9

14276

13.6

2.7

1997-98

75082

13.4

346971

61.8

3753

3.3

0.7

14211

12.5

2.5

1998-99

65185

11.0

359839

60.8

2990

2.7

0.5

13643

12.2

2.3

1999-00

51966

8.3

421771

67.0

2884

2.3

0.5

17210

13.7

2.7

2000-01

51771

7.7

498775

74.2

2355

1.5

0.4

19395

12.6

2.9

2001-02

50035

7.0

526501

73.5

2198

1.4

0.3

18265

12.0

2.6

n.a. Not available

Note : Where interest on foreign debt was not available, total interest paid overseas was used.

Composition of Gross Foreign Debt by Institutional Sector

Concepts

Foreign debt may be classified by the type of borrower.

The private sector comprises all corporations outside the general government sector. It can be subdivided into financial and non-financial corporations. Financial corporations, such as banks and insurance companies, are mainly engaged in incurring liabilities and acquiring financial assets while non-financial corporations are mainly engaged in the production of goods and services for sale.

The public sector comprises the general government sector, and all financial and non-financial corporations controlled by the general government sector. General government consists of departments, offices and organisations which are the agencies of the Commonwealth, State or local public authorities. Public financial corporations include the Reserve Bank and central borrowing authorities. Central borrowing authorities are entities set up by State and Territory governments to centralise their borrowing and financial assets management. It has only been since 1984 that State and Territory governments have begun borrowing in their own right(3); local government foreign borrowing is negligible.

Comments

Among the interesting trends in the distribution of gross foreign debt by institutional sector are:

  • Decline in the general government and Reserve Bank's share of gross foreign debt from 35 per cent in 1980 to 8 per cent in 1992, rising to 14 per cent in 1996 and falling again to 5 per cent in 2002.
  • Growth in the central borrowing authorities' (i.e. State and Territory governments') share from nil in 1983 to 18 per cent in 1995, falling to 5 per cent in 2002.
  • Little change in the private sector's share during the 1980s and first half of the 1990s, increasing rapidly from 63 per cent in 1996 to 87 per cent in 2002.
  • Rapid rise in the private financial corporations' share from 7 per cent in 1980 to 69 per cent in 2002.
  • Decline in the private non-financial corporations' share from 48 per cent in 1980 to 18 per cent in 2002.

Details: Table 4 and Figure 7.

Table 4. Composition of Gross Foreign Debt-Institutional Sector, 1980-2002

$ Million

 

Public Sector

 

Private Sector

 

Total

gross

foreign

debt

30 June

General government
and Reserve Bank

Central

borrowing

authorities

Other

Total

public

sector

 

Financial

corporations

Non-

financial

corporations

Total

private

sector

 

1980

5894

0

1497

7391

1226

8049

9275

16666

1981

5105

0

2122

7227

1753

9867

11620

18847

1982

6046

0

3786

9832

3464

16098

19562

29394

1983

8151

0

6895

15046

4269

21909

26178

41224

1984

8902

340

9358

18600

6086

25990

32076

50676

1985

13310

1901

15597

30808

10121

34523

44644

75452

1986

20079

3855

19864

43798

15957

42170

58127

101925

1987

24079

6684

20251

51014

23070

48355

71425

122439

1988

23932

8418

21155

53505

32474

52151

84625

138130

1989

19344

12669

25999

58012

41515

62347

103862

161874

1990

20498

16977

30181

67656

51161

65421

116583

184239

1991

18347

21509

29364

69220

62457

65985

128441

197661

1992

18038

29600

30522

78160

72263

67532

139795

217955

1993

23417

35408

33128

91953

74922

71666

146588

238541

1994

24545

37634

30963

93142

88926

64417

153342

246484

1995

30027

48345

23352

101724

103729

62795

166524

268248

1996

39748

41388

20133

101269

115780

58484

174264

275533

1997

42621

40203

13454

96278

145415

61153

206568

302846

1998

38511

36571

11639

86721

187507

72742

260250

346971

1999

32413

32772

10094

75279

209734

74825

284560

359839

2000

22906

29060

11479

63445

271377

86949

358326

421771

2001

24149

27622

17179

68950

328896

100929

429825

498775

2002

25109

24926

18201

68236

362602

95663

458265

526501

Table 4. Composition of Gross Foreign Debt-Institutional Sector, 1980-2002 continued

Per Cent of Total

 

Public Sector

 

Private Sector

 

Total

gross

foreign

debt

30 June

General government
and Reserve Bank

Central

borrowing

authorities

Other

Total

public

sector

 

Financial

corporations

Non-

financial

corporations

Total

private

sector

 

1980

35.4

0.0

9.0

44.3

7.4

48.3

55.7

100.0

1981

27.1

0.0

11.3

38.3

9.3

52.4

61.7

100.0

1982

20.6

0.0

12.9

33.4

11.8

54.8

66.6

100.0

1983

19.8

0.0

16.7

36.5

10.4

53.1

63.5

100.0

1984

17.6

0.7

18.5

36.7

12.0

51.3

63.3

100.0

1985

17.6

2.5

20.7

40.8

13.4

45.8

59.2

100.0

1986

19.7

3.8

19.5

43.0

15.7

41.4

57.0

100.0

1987

19.7

5.5

16.5

41.7

18.8

39.5

58.3

100.0

1988

17.3

6.1

15.3

38.7

23.5

37.8

61.3

100.0

1989

12.0

7.8

16.1

35.8

25.6

38.5

64.2

100.0

1990

11.1

9.2

16.4

36.7

27.8

35.5

63.3

100.0

1991

9.3

10.9

14.9

35.0

31.6

33.4

65.0

100.0

1992

8.3

13.6

14.0

35.9

33.2

31.0

64.1

100.0

1993

9.8

14.8

13.9

38.5

31.4

30.0

61.5

100.0

1994

10.0

15.3

12.6

37.8

36.1

26.1

62.2

100.0

1995

11.2

18.0

8.7

37.9

38.7

23.4

62.1

100.0

1996

14.4

15.0

7.3

36.8

42.0

21.2

63.2

100.0

1997

14.1

13.3

4.4

31.8

48.0

20.2

68.2

100.0

1998

11.1

10.5

3.4

25.0

54.0

21.0

75.0

100.0

1999

9.0

9.1

2.8

20.9

58.3

20.8

79.1

100.0

2000

5.4

6.9

2.7

15.0

64.3

20.6

85.0

100.0

2001

4.8

5.5

3.4

13.8

65.9

20.2

86.2

100.0

2002

4.8

4.7

3.5

13.0

68.9

18.2

87.0

100.0

Table 4. Composition of Gross Foreign Debt-Institutional Sector, 1980-2002 continued

Per Cent of GDP

 

Public Sector

 

Private Sector

 

Total

gross

foreign

debt

30 June

General government
and Reserve Bank

Central

borrowing

authorities

Other

Total

public

sector

 

Financial

corporations

Non-

financial

corporations

Total

private

sector

 

1980

4.6

0.0

1.2

5.7

1.0

6.3

7.2

13.0

1981

3.5

0.0

1.5

5.0

1.2

6.8

8.0

12.9

1982

3.6

0.0

2.3

5.9

2.1

9.6

11.7

17.6

1983

4.5

0.0

3.8

8.3

2.4

12.1

14.5

22.8

1984

4.4

0.2

4.6

9.1

3.0

12.8

15.8

24.9

1985

5.9

0.8

6.9

13.7

4.5

15.3

19.8

33.5

1986

8.1

1.6

8.0

17.6

6.4

17.0

23.4

41.1

1987

8.8

2.5

7.4

18.7

8.5

17.8

26.2

45.0

1988

7.7

2.7

6.8

17.2

10.5

16.8

27.2

44.5

1989

5.5

3.6

7.4

16.5

11.8

17.7

29.5

46.0

1990

5.3

4.4

7.8

17.6

13.3

17.0

30.3

47.8

1991

4.6

5.4

7.4

17.4

15.7

16.6

32.3

49.7

1992

4.4

7.3

7.5

19.2

17.8

16.6

34.4

53.6

1993

5.5

8.3

7.8

21.6

17.6

16.8

34.4

56.0

1994

5.5

8.4

6.9

20.8

19.9

14.4

34.3

55.1

1995

6.4

10.3

5.0

21.6

22.0

13.3

35.3

56.9

1996

7.9

8.2

4.0

20.1

23.0

11.6

34.7

54.8

1997

8.0

7.6

2.5

18.2

27.4

11.5

39.0

57.2

1998

6.9

6.5

2.1

15.5

33.4

13.0

46.4

61.8

1999

5.5

5.5

1.7

12.7

35.5

12.6

48.1

60.8

2000

3.6

4.6

1.8

10.1

43.1

13.8

56.9

67.0

2001

3.6

4.1

2.6

10.3

48.9

15.0

63.9

74.2

2002

3.5

3.5

2.5

9.5

50.6

13.4

64.0

73.5

Composition of Gross Foreign Debt by Currency

Concepts

Loans in foreign currencies are converted to Australian dollars ($A) at the exchange rate applying on the last day of the period.

The greater the proportion of debt that is denominated in foreign currency, the greater the risk that a fall in the $A with respect to another currency will increase the $A value of the debt denominated in that currency. To eliminate or reduce exposure to such risk, many Australian enterprises engage in hedging activities, predominantly through foreign currency derivative contracts. According to a survey conducted by the ABS, Australian resident enterprises in 2001 had policies in place that had the intent of hedging 77 per cent of the value of their foreign currency denominated debt assets and liabilities(4).

Comments

The proportion of Australia's foreign debt denominated in $A has increased substantially since the early 1980s, reflecting the increased willingness by foreigners to hold $A denominated assets. Between 1981 and 1997, the proportion of debt denominated in $A increased from 12 to 45 per cent, falling thereafter to 33 per cent in 2002.

Of the rest, the largest share of debt is expressed in United States dollars, ranging from a high of 52 per cent in 1984 to a low of 28 per cent in 1996; in 2002 the share was 45 per cent. Small proportions of debt are denominated in Euros (6 per cent in 2002), Japanese Yen (5 per cent) and Pounds Sterling (4 per cent).

Details: Table 5 and Figure 8.

Table 5. Composition of Gross Foreign Debt-Currency, 1981-2002

$ Million (In Australian Dollar Terms)

 

 

Foreign Currency

 

 

30 June

Australian Dollars

U.S. Dollars

Pounds Sterling

Swiss Francs

Euro

Japanese Yen

Other (a)

Total

 

Total gross foreign debt

1981

2198

7874

497

973

..

1066

2556

12966

18847

1982

3127

13609

748

1869

..

1196

3629

21051

29394

1983

5395

20220

1228

2356

..

1726

4967

30497

41224

1984

7278

26085

1435

2570

..

1585

5148

36823

50676

1985

12782

37192

1836

4023

..

4924

6716

54691

75452

1986

21543

45715

3032

5380

..

9148

7732

71007

101925

1987

26601

52451

3846

5212

..

9997

9310

80816

122439

1988

39934

44104

4630

5267

..

12646

16540

83187

138130

1989

56043

59416

4356

4526

..

11596

11202

91096

161874

1990

69476

58200

3197

4816

..

13155

14293

93661

184239

1991

74868

63410

2743

4113

..

16603

17087

103956

197662

1992

78528

78593

2899

3511

..

15605

12131

112739

217955

1993

82972

91927

2102

2917

..

17902

10600

125448

238542

1994

85617

84758

2173

3047

..

19435

10897

120310

246484

1995

104891

81353

2186

2655

..

21036

10456

117686

268247

1996

110784

77096

3563

2805

..

20744

21020

125228

275533

1997

137053

105522

6984

3502

..

25316

24469

165793

302846

1998

139089

138820

8004

2773

..

23816

34469

207882

346971

1999

136994

143230

9349

3307

14597

22789

29573

222845

359839

2000

146457

183388

14755

2234

24470

31544

18923

275314

421771

2001

163837

240949

18205

2176

28018

25539

20051

334938

498775

2002

175590

238254

23059

3721

30358

25440

30079

350911

526501

Table 5. Composition of Gross Foreign Debt-Currency, 1981-2002 continued

Per Cent of Total

 

 

Foreign Currency

 

 

30 June

Australian Dollars

U.S. Dollars

Pounds Sterling

Swiss Francs

Euro

Japanese Yen

Other (a)

Total

 

Total gross foreign debt

1981

11.7

41.8

2.6

5.2

..

5.7

13.6

68.8

100.0

1982

10.6

46.3

2.5

6.4

..

4.1

12.3

71.6

100.0

1983

13.1

49.0

3.0

5.7

..

4.2

12.0

74.0

100.0

1984

14.4

51.5

2.8

5.1

..

3.1

10.2

72.7

100.0

1985

16.9

49.3

2.4

5.3

..

6.5

8.9

72.5

100.0

1986

21.1

44.9

3.0

5.3

..

9.0

7.6

69.7

100.0

1987

21.7

42.8

3.1

4.3

..

8.2

7.6

66.0

100.0

1988

28.9

31.9

3.4

3.8

..

9.2

12.0

60.2

100.0

1989

34.6

36.7

2.7

2.8

..

7.2

6.9

56.3

100.0

1990

37.7

31.6

1.7

2.6

..

7.1

7.8

50.8

100.0

1991

37.9

32.1

1.4

2.1

..

8.4

8.6

52.6

100.0

1992

36.0

36.1

1.3

1.6

..

7.2

5.6

51.7

100.0

1993

34.8

38.5

0.9

1.2

..

7.5

4.4

52.6

100.0

1994

34.7

34.4

0.9

1.2

..

7.9

4.4

48.8

100.0

1995

39.1

30.3

0.8

1.0

..

7.8

3.9

43.9

100.0

1996

40.2

28.0

1.3

1.0

..

7.5

7.6

45.4

100.0

1997

45.3

34.8

2.3

1.2

..

8.4

8.1

54.7

100.0

1998

40.1

40.0

2.3

0.8

..

6.9

9.9

59.9

100.0

1999

38.1

39.8

2.6

0.9

4.1

6.3

8.2

61.9

100.0

2000

34.7

43.5

3.5

0.5

5.8

7.5

4.5

65.3

100.0

2001

32.8

48.3

3.6

0.4

5.6

5.1

4.0

67.2

100.0

2002

33.4

45.3

4.4

0.7

5.8

4.8

5.7

66.6

100.0

(a) Includes reserve assets

__ Break in series due to introduction of Euro in 1999.

Composition of Gross Foreign Debt by Country

Concepts

Country refers to the foreign creditor. International capital markets such as the Eurobond market cannot be sub-divided by country. Similarly, international institutions cannot be classified to one country.

Domicile refers to the country of issue of the loan. For example, if foreigners buy Australian bonds in Australia, the loan is part of Australia's foreign debt but domiciled in Australia. Debt domiciled in Australia is typically denominated in $A. Debt domiciled abroad is actually raised overseas.

Comments

The most important creditor countries for Australia in terms of total debt are the United States, the United Kingdom and Japan, representing 26, 17 and 7 per cent of gross foreign debt respectively in 2001. 'Other' (principally international capital markets) stands at around a quarter of all debt. Almost 60 per cent of debt is owed to residents of OECD countries.

The United States, the United Kingdom and Japan have consistently been the most important creditor countries, though the relative importance of each has changed over time. In the early 1990s, Japan was the most important creditor country, followed by the United States and the United Kingdom. Since this time, however, the United States and the United Kingdom have increased their relative importance while that of Japan has declined.

The proportion of borrowing domiciled in Australia has fallen in recent years from 22 per cent in 1998 to 17 per cent in 2001.

Details: Table 6 and Figure 9.

Table 6. Composition of Gross Foreign Debt-Country, 1992-2001

$ Million

Country:

Country Groups:

Domicile:

30 June

United States

Japan

United Kingdom

Singapore

Hong Kong

Other Countries

Other (a)

APEC

ASEAN

EU

OECD

Australia

Abroad

TOTAL

$ million

1992

33527

39592

29919

6750

9810

28279

70078

96266

7388

43906

125539

35971

181984

217955

1993

42305

40581

29961

6571

11671

29776

77677

108734

7380

44121

135958

37148

201394

238542

1994

40008

36587

32209

7304

13496

34972

81908

106997

8059

50246

136080

41881

204603

246484

1995

40773

38864

34024

6228

14223

38123

96012

110352

7260

54711

143055

44636

223611

268247

1996

46615

42772

28444

8099

13288

38286

98029

119942

9234

50620

148712

58646

216887

275533

1997

56083

42410

40460

192

16236

48881

98584

129563

9025

62788

170561

65914

236932

302846

1998

70870

38779

50990

13166

14947

45142

113077

145601

13964

75935

195119

75766

271205

346971

1999

81462

31513

47704

15908

14937

56383

111932

152422

17957

73650

195558

71481

288358

359839

2000

103249

36299

70147

16349

21347

66617

107763

190003

18820

98432

249877

69569

352202

421771

2001

127189

32183

86620

21262

31664

75820

124037

225306

24565

121463

294683

86680

412095

498775

% of Total

1992

15.4

18.2

13.7

3.1

4.5

13.0

32.2

44.2

3.4

20.1

57.6

16.5

83.5

100.0

1993

17.7

17.0

12.6

2.8

4.9

12.5

32.6

45.6

3.1

18.5

57.0

15.6

84.4

100.0

1994

16.2

14.8

13.1

3.0

5.5

14.2

33.2

43.4

3.3

20.4

55.2

17.0

83.0

100.0

1995

15.2

14.5

12.7

2.3

5.3

14.2

35.8

41.1

2.7

20.4

53.3

16.6

83.4

100.0

1996

16.9

15.5

10.3

2.9

4.8

13.9

35.6

43.5

3.4

18.4

54.0

21.3

78.7

100.0

1997

18.5

14.0

13.4

0.1

5.4

16.1

32.6

42.8

3.0

20.7

56.3

21.8

78.2

100.0

1998

20.4

11.2

14.7

3.8

4.3

13.0

32.6

42.0

4.0

21.9

56.2

21.8

78.2

100.0

1999

22.6

8.8

13.3

4.4

4.2

15.7

31.1

42.4

5.0

20.5

54.3

19.9

80.1

100.0

2000

24.5

8.6

16.6

3.9

5.1

15.8

25.6

45.0

4.5

23.3

59.2

16.5

83.5

100.0

2001

25.5

6.5

17.4

4.3

6.3

15.2

24.9

45.2

4.9

24.4

59.1

17.4

82.6

100.0

(a) Includes international institutions and data, such as international capital markets, not allocated to any particular country

Composition of Gross Foreign Debt by Maturity

Concepts

The maturity profile of foreign debt shows the period left to repayment and thus points to the liquidity aspects of foreign debt.

Comments

Most loans outstanding are due within a very short period, leaving Australia vulnerable to fluctuations in the level of debt. In 2002, 55 per cent of loans were due within a year and 40 per cent were due within 90 days. About a quarter of all loans were due later than 5 years.

The level of debt outstanding has grown significantly larger in relation to GDP. This growth has been especially marked for loans that have either a very short term or a very long term to run. Between 1997 and 2002, loans due within 90 days have grown in size from 16 to 30 per cent of GDP while loans due later than five years have grown from 9 to 18 per cent of GDP.

Details: Table 7.

Table 7. Composition of Gross Foreign Debt-Residual Maturity of Debt Outstanding, 1997-2002

Contractually due for repayment:

1 year or less

Greater than

1 year and

up to

5 years

Greater than 5 years

Unallocated

TOTAL

30 June

Less than

or up to

90 days

Greater than

90 days

and up to

1 year

Total,

1 year

or less

$ million

1997

87019

47459

134478

66336

48303

53730

302846

1998

116513

54973

171486

76492

83953

15040

346971

1999

111492

55599

167091

83456

91466

17826

359839

2000

138664

72768

211432

112111

98229

0

421771

2001

191196

76627

267823

118395

112557

0

498775

2002

210944

76712

287656

111796

127048

0

526501

% of Total (excluding unallocated)

1997

34.9

19.1

54.0

26.6

19.4

-

100.0

1998

35.1

16.6

51.7

23.0

25.3

-

100.0

1999

32.6

16.3

48.9

24.4

26.7

-

100.0

2000

32.9

17.3

50.1

26.6

23.3

-

100.0

2001

38.3

15.4

53.7

23.7

22.6

-

100.0

2002

40.1

14.6

54.6

21.2

24.1

-

100.0

% of GDP

1997

16.4

9.0

25.4

12.5

9.1

10.1

57.2

1998

20.8

9.8

30.6

13.6

15.0

2.7

61.8

1999

18.8

9.4

28.2

14.1

15.5

3.0

60.8

2000

22.0

11.6

33.6

17.8

15.6

0.0

67.0

2001

28.4

11.4

39.8

17.6

16.7

0.0

74.2

2002

29.5

10.7

40.2

15.6

17.7

0.0

73.5

Components of Increase in Net Foreign Debt

Concepts

There are three components of an increase in net foreign debt that are identified in the ABS data:

  • transactions;
  • exchange rate movements;
  • price changes; and
  • other.

Transactions refers to the net increase in new borrowings from non-residents where new borrowings is the difference between drawings and repayments.

Foreign debt data are expressed in Australian dollars, although they are mostly denominated in foreign currencies. Debt estimates are converted to Australian dollars at the exchange rate applying on the last day of the period. Movements in the exchange rate of the Australian dollar can have a significant impact on the level of foreign debt expressed in Australian currency.

Price changes refers mainly to security revaluations.

Comments

Net new borrowings are often the single largest contributor to an increase in net foreign debt, though in some years other factors have also had a significant impact. In 2000-01, for example, exchange rate movements added almost twice as much as net new borrowings to the increase in net foreign debt. On several occasions the effect of exchange rate movements, security revaluations and other adjustments has been to reduce the level of net foreign debt below what it would otherwise have been. In 2001-02, net new borrowings rose by 35 billion but net foreign debt increased by only 17 billion due to the influence of these other factors.

Details: Table 8 and Figure 10.

Table 8. Components of Increase in Net Foreign Debt, 1988-89 to 2001-02

$ Million

 

Transactions

Exchange

rate

variations

Price

changes

Other

adjustments

Total increase

in net

foreign debt

1988-89

14927

1184

-43

1420

17488

1989-90

16059

-1155

-81

1999

16822

1990-91

6682

2464

617

2583

12346

1991-92

13574

4401

680

657

19312

1992-93

7859

7737

1461

-2069

14988

1993-94

4584

-5065

-4882

-778

-6141

1994-95

19423

3537

-1174

-2309

19477

1995-96

9952

-7731

1587

-728

3080

1996-97

12594

1567

1546

-949

14758

1997-98

5135

13303

2158

-1441

19155

1998-99

13685

-3956

-6808

-16

2905

1999-00

39168

11996

-2373

-1677

47114

2000-01

11289

22076

3537

-1234

35668

2001-02

35307

-14888

-3236

-200

16983

Composition of Net Foreign Investment-Debt and Equities

Concepts

Borrowing is only one kind of capital inflow. Another is investment in ownership of Australian assets including shares, property and retained earnings of foreign owned companies. Trade credit (e.g. money owed by importers) is another category of capital inflow but is relatively small.

The current account deficit is often regarded as directly causing our foreign debt. The complexity of the relationship however, should be noted:

  • Exchange rate movements have caused large variations in our foreign debt. As current account deficits influence exchange rates, there is also an indirect influence of current account deficits on the level of debt.
  • The capital account in the Balance of Payments statistics shows capital inflows and outflows, including lending, borrowing and other investment. Conceptually, any deficit on the current account is met by a surplus on the capital account.
  • As noted above, borrowing is not the only kind of capital inflow. Some of the current account deficit is funded by other forms of capital inflow.

Comments

In the early 1980s, well over half of Australia's net foreign investment was in the form of equities. From 1983 however, that situation reversed with debt accounting for 51 per cent of net foreign investment in that year and climbing to 80 per cent in 1993. Although it fell to below 75 per cent for most of the remainder of the 1990s, debt's share of net foreign investment has since climbed to 86 per cent in 2002.

Changes in the debt/equity mix largely reflect changes in the method of financing the current account deficit. While Australia has almost always had a deficit on its current account, it wasn't until the early 1980s that these deficits were associated with a build up of debt. Earlier deficits were not associated with a build up of debt because the deficits were on average lower and the capital inflow to finance these deficits was largely long-term equity.

Details: Table 9 and Figure 11.

Table 9. Net Foreign Investment In Australia-Levels, 1980-2002

30 June

$ million

% of net foreign investment

% of GDP

Net

foreign

debt

Net

foreign

equity

Net

foreign

investment

Net

foreign

debt

Net

foreign

equity

Net

foreign

debt

Net

foreign

equity

Net

foreign

investment

1980

7923

19426

27349

29.0

71.0

6.2

15.1

21.3

1981

9361

24050

33411

28.0

72.0

6.4

16.5

22.9

1982

18378

21114

39492

46.5

53.5

11.0

12.6

23.6

1983

25169

24120

49289

51.1

48.9

13.9

13.4

27.3

1984

31850

24203

56053

56.8

43.2

15.7

11.9

27.6

1985

53055

25875

78930

67.2

32.8

23.6

11.5

35.1

1986

78396

21080

99476

78.8

21.2

31.6

8.5

40.1

1987

87971

34477

122448

71.8

28.2

32.3

12.7

45.0

1988

96502

31260

127762

75.5

24.5

31.1

10.1

41.1

1989

113989

35946

149935

76.0

24.0

32.4

10.2

42.6

1990

130809

41995

172803

75.7

24.3

34.0

10.9

44.9

1991

143153

48328

191482

74.8

25.2

36.0

12.1

48.1

1992

162466

43714

206179

78.8

21.2

39.9

10.7

50.7

1993

177453

43674

221127

80.2

19.8

41.6

10.2

51.9

1994

171313

64785

236098

72.6

27.4

38.3

14.5

52.8

1995

190790

64719

255509

74.7

25.3

40.5

13.7

54.2

1996

193872

81439

275311

70.4

29.6

38.6

16.2

54.8

1997

208628

81528

290156

71.9

28.1

39.4

15.4

54.8

1998

227782

69156

296938

76.7

23.3

40.6

12.3

52.9

1999

230689

90967

321655

71.7

28.3

39.0

15.4

54.4

2000

277804

48700

326505

85.1

14.9

44.2

7.7

51.9

2001

313472

47562

361034

86.8

13.2

46.6

7.1

53.7

2002

330457

55282

385739

85.7

14.3

46.2

7.7

53.9

Endnotes

  1. Robert Dippelsman, 'Australia's Foreign Debt', Current Issues Paper Number 4, 1989-90, Legislative Research Service, Parliamentary Library.

  2. Economic Planning Advisory Council, External Balance and Economic Growth, Council Paper No. 22, October 1986.

  3. For many years, a 'Gentlemen's Agreement' existed which brought borrowings by State semi-governmental authorities under Loan Council supervision. This meant that all borrowing by the States was effectively undertaken by the Commonwealth and secured by the issuance of Commonwealth securities. This agreement, however, unravelled when the States established central borrowing authorities (CBAs) to circumvent Loan Council borrowing limits and began borrowing in their own right by issuing CBA securities. The Commonwealth responded to this situation in 1984 by suspending the 'Gentlemen's agreement'. (See Richard Webb, 'The Australian Loan Council', Research Note No. 43, 2001-02, Information and Research Services, Parliamentary Library.)

  4. 'Measuring Australia's Foreign Currency Exposure', Balance of Payments and International Investment Position, ABS Catalogue No. 5302.0, December Quarter 2001.

 


Facebook LinkedIn Twitter Add | Email Print
Back to top